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No more double-dipping for landlords in Lower Manhattan

On Behalf of | Aug 16, 2019 | New York City Landlord-Tenant Law Blog, Rent Stabilization |

Most New Yorkers complain about substantial and crushing rent increases. Wanting to pay the same rent – or only a modest increase – doesn’t make you greedy. It just makes you normal, especially when you live in a place where renting is more of a necessity than a choice.

How would you feel if you found out that your landlord was getting a multi-million-dollar tax break while simultaneously trying to increase your rent by 10, 20 or 30%? Thousands of renters in Lower Manhattan don’t have to imagine. They have lived through it for the last 6 years.

Public good intentions turned into double dipping for some landlords

In 1995, lawmakers enacted a tax abatement bill known as 421-g that gave developers generous tax breaks. In return for these tax benefits, the developers agreed to treat all the tenants in their buildings as rent stabilized, capping rent increases to reasonable levels permitted by law. The goal of the 421-g program was to encourage developers to convert their obsolete commercial/office buildings, which were vacant and useless, into residential units, including affordable housing, thereby creating a thriving and stable community in the area.

What went wrong?

The language of the 421-g statute was crystal clear in providing for rent stabilization for all units as the quid pro quo for getting its generous tax benefits.

But the then NYC Mayor and the New York State Senate Majority Leader at the time, both Republicans and big supporters of developers and foes of affordable housing, decided to write each other private letters, interpreting the 421-g statute as permitting for the deregulation of apartments renting above a threshold amount of $2,000.

They also made sure that NYC HPD would enact regulations interpreting the law as they saw fit. This was wrong.

Landlords saw an opening to take advantage, and they rammed through it without hesitation or shame. More than 75% of the units created under the 421-g program had set their initial rents above this threshold. And over the years, rents of 95% of the units exceeded the threshold. Landlords kept their tax break – amounting to millions over the years- and continued to raise rents, some exponentially, and causing tenants dislocation and misery.

A few tenants decided that enough was enough after their landlords sought yet another double-digit rent hike, like one couple at 90 West Street whose landlord attempted to raise their rents by 33%, with a week notice.

The tenants banded together, sought help and got it, with the assistance of our own attorney, Serge Joseph. The court sided with Joseph and the tenants, ruling that they should have been offered stabilized rents. Due to a recently enacted law, the court will now award six years of rent overcharges, rather than four.

The ruling could impact thousands more. Estimates show that the owners of 39 building with 6,088 units received the benefits.

Are you eligible for back rent?

Tax benefits as the underlying reason for rent stabilization? It’s not something the average person would think about, but you don’t need to know the law to know something isn’t right. Sometimes these cases start with nothing more than a gut feeling that your landlord isn’t following all the rules.

Unfortunately, many people don’t feel like they have the power to change things. “You have to really be in a privileged position in order to even fight these things,” one of the former tenants said in an interview. “Most people just leave and give up.”

Have you ever felt this way? Don’t give up. Speak up. Talk to someone who has the power to help you.

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